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The Diminishing Benefits of U.S. Cross-Listing: Economic Consequences of SEC Rule 12h-6

Published online by Cambridge University Press:  15 June 2017

Chinmoy Ghosh  and
Fan He
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Abstract

On Mar. 21, 2007, the U.S. Securities and Exchange Commission (SEC) passed Exchange Act Rule 12h-6 to make it easier for cross-listed firms to deregister from the U.S. market and escape its regulatory costs. Using difference-in-difference (DD) tests, we find that, on average, Rule 12h-6’s passage induced an increase in voting premium, a decline in equity raising, and a decline in cross-listing premium. These effects are observed for exchange-listed firms and for firms from countries with weak investor protection. We conclude that although cross-listed firms are still valued at a significant premium over non-cross-listed firms, the rule decreased the value of commitment to the U.S. regulatory system.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 52 , Issue 3 , June 2017 , pp. 1143 - 1181
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2017 

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Footnotes

1

The authors acknowledge the insightful comments and suggestions from an anonymous referee and Paul Malatesta (the editor) during the entire review process. The feedback from participants at the 2012 Financial Management Association annual meeting is also gratefully acknowledged. The authors are responsible for all remaining errors.

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